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DairyBusiness Update: May 7, 2014


U.S.  Dairy Exports Top $700 million in March
The value of U.S. dairy exports in March topped $700 million for the first time, reports the U.S. Dairy Export Council (USDEC). Exports of cheese, whey proteins, lactose and milk protein concentrate all reached new highs, while butterfat exports were the most in more than 20 years and nonfat dry milk/skim milk powder (NDM/SMP) rebounded from the level of the previous four months.
   U.S. suppliers shipped 201,380 tons of milk powders, cheese, butterfat, whey and lactose in March, up 33% from last year. Total value of all exports was $717.0 million, up 46%.
   Exports to China nearly tripled in March, to $91 million, paced by gains in NDM/SMP and whey products. Shipments to Mexico were up 60%, Southeast Asia up 43% and Middle East/North Africa up 33%. These four customers accounted for nearly two-thirds of U.S. exports during the month.
   In the first quarter, U.S. exports of NDM/SMP were up 19% from last year’s record pace. China, which bought less than 2,000 tons in the first quarter of 2013, bought 15,420 tons in Q1-2014. In addition, sales to Southeast Asia were up 31%, offsetting a 9% drop in shipments to Mexico.
   Cheese exports in the first quarter were up 42%. Top markets Mexico, Middle East/North Africa, South Korea and Japan all saw large increases vs. the prior year.
   Butterfat exports more than doubled compared with a year earlier. U.S. suppliers shipped more than 10,000 tons per month in Q1, accounting for nearly 14% of U.S. butter production over that period. The majority of butterfat exports went to the Middle East/North Africa region. Total whey exports in Q1 were 12% greater than a year ago. Exports of dry sweet whey were up 16% and WPC shipments were up 6%.
   China remains the major customer for U.S. whey products, with first quarter purchases up 29% from a year earlier.
   U.S. exporters also continue to expand shipments of whole milk powder (+236% in the first quarter) and milk protein concentrate (+55%). Major customers for WMP are Vietnam, Mexico, Algeria and China. Top buyers for MPC are New Zealand and Morocco.
   U.S. exports (on a total milk solids basis) were equivalent to 17.7% of U.S. milk solids production in March – the most ever. Imports were equivalent to 3.1% of production, according to USDEC.
   Read more at www.usdec.org.

Chinese Dairy Imports Waning, Still Enormous in Historical Context
   Jim Dunn Professor of Agricultural Economics at Penn State University reports that the prices of all dairy products have been mixed in the last month. The CME block cheese price fell by 9% in April, after a short mid-month rally. It is now $2.07/lb. This lower cheese price of course is reflected in a weaker Class III price, which is well below the April Class III price (see below). Exports seem to have peaked, although they continue to be high compared to pre-2013 levels. CME butter prices are up 12.5¢/lb. in the past month at $2.10/lb. The butter price fell through much of April before a strong rally in the past week to climb 20¢/lb. The CME skim-milk powder price fell by 13¢/lb. to $1.965/lb. Dry whey prices rose 3.8% to $0.654/lb.
   He also reports that the U.S. dollar is slightly lower in the past month against the Australian and New Zealand dollars and the Euro. This change was not tied to any particular news that I can see. Chinese dairy imports seem to be waning, although they are still enormous in a historical context. The New York Times reported yesterday that “The Chinese government has imposed new limits on foreign brands of milk powder and infant formula sold in China.” Presumably China is trying to reduce dairy imports, which would certainly hurt milk prices.
   Corn has risen since last month, ending at $5.13/bu. (up 3.4%) for the May 2014 contract. The problems in Ukraine have hurt the value of its currency, increasing the costs of farm inputs and creating the expectation of a smaller crop. Additionally the spread of the turmoil in Ukraine to Odessa creates a potential export problem by water, since Odessa is the major port of Ukraine. Soybeans are almost unchanged from last month, with a variety of bearish news that the market is ignoring. Soybeans and soybean meal are up a bit since last month, with beans up $0.02/bu. to $14.64/bu. for the May 2014 contract and meal up $10/ton at $487.
   Penn State’s measure of income over feed costs fell by 2.2% in April, but it is still very high. Figure 1 shows how unusual these values are compared to recent years. This decrease is 27¢/cow/day. The April value of $11.93/cow/day is the second highest value since we began calculating this measure. Although the milk price rose in April, so did the feed cost, with the net effect being a small decrease in IOFC. Feed prices rose by 9.1%, with higher prices for all three ingredients in the ration. The cost of feeding a cow rose by 47¢/day to $5.62. Income over feed cost reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day. Figure 1 and Table 2 showing the monthly data follow.
   The allocation of the revenue per hundred pounds of milk is shown in Table 3. The milk margin is the estimated amount from the Pennsylvania all milk price that remains after feed costs are paid. Like income over feed cost, this measure shows that the April PA milk margin was 2.2% lower than in March.
   Read more at: http://www.personal.psu.edu/faculty/j/w/jwd6/DairyOutlook%20may%2014.pdf

GDT: Near-Term Bottom May be Here
   So-says HighGround Dairy’s Eric Meyer. The GDT Price Index across all commodities has fallen for the sixth straight auction which adds up to three months of losses and is down 21% since the high made on 4 Feb. But this week’s event was the leanest of the six percentage declines which indicates a near-term bottom may be upon us.
   It was clear from our meetings and hallway chatter at the American Dairy Products Institute Annual Meeting in Chicago last week that the EU is awash in milk. Excess supply from this region and weaker Q2 demand after impressive trade during Q1 has been the driver which has moved global prices lower over the past few months.
   And as the US spring flush is expected to reach its peak and Fonterra continues to add more volume to the Global Dairy Trade auction over the past couple of months, it is compelling that the supply side is leaning bearish for commodity prices in the near term.
   But as Northern Hemisphere milk production grows and pasture conditions improve this winter in New Zealand, the expectation is for a significant recovery in milk supply during the second half of 2014. In the short-term, buyers likely have what they need but their inventories are still below normal.
   Global end-users will eventually need to step back into the market which should have a stabilizing effect on prices over the next 30-90 days, Meyer says, but “Significant risks still exist in the global milk supply.”
   To read more, contact Meyers at: dairy@highgroundtrading.com.    

Lagging NDPSR Block Cheese, Powder & Whey Prices Dip
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released this afternoon shows the U.S. average block Cheddar cheese price at $2.2463/lb., down 4.6¢ from the week before, while the barrels averaged $2.2556, up 0.6¢. Butter jumped 4.1¢, to $1.9036/lb. Nonfat dry milk averaged $1.9473/lb., down 6.7¢, and dry whey averaged 67.52¢/lb., down 1.2¢. These prices are used in determining Federal order Class milk prices.

California Powder Slips Below $2/lb. Again
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices today at $1.9277/lb. for the week ending May 2, on sales of 16.0 million lbs. The price was down from $2.0124/lb. the week before, on sales of 11.3 million lbs.

Obama Trade Agenda Hits Tough Waters
   The Hill reports that election-year politics have complicated President Obama’s trade agenda, which is in danger of being punted into the second half of his final term.
Congress is unlikely to move trade promotion authority (TPA) legislation before the midterm elections with Democrats unwilling to take the political risk of crossing unions and liberal groups opposed to expanded trade, several business leaders acknowledged.
That is hampering negotiations on the cornerstone agreement of Obama’s presidency, the Trans-Pacific Partnership (TPP) with 12 countries including Japan and Vietnam.
   “Unfortunately I think the entire business community is grinding slowly to a halt because it sees the window closing or quite honestly closed on getting TPA done this year,” said Steve Biegun, Ford’s vice president of international government relations.
   Read more: http://thehill.com/policy/finance/205411-president-obamas-trade-agenda-hits-rough-waters#ixzz313EbHYlo

DairyBusiness promotes Hudson to Marketing Manager
   DairyBusiness Communications announces that Mike Hudson will be taking on an expanded role as Marketing Manager for DairyBusiness media outlets.
   Hudson has been with the company as a Senior Graphic Designer since 2004, serving most recently as Creative Services Manager since 2009. His new role as Marketing Manager will focus on managing the marketing, advertising and promotional staff and activities. In this role, he will also work to measure and enhance the position and image of DairyBusiness through its various marketing goals and objectives.
   Prior to joining DairyBusiness Communications, Hudson graduated with a Bachelor of Arts degree in Studio Arts from the State University of New York at Plattsburgh. He held a prior position as Graphic Designer at one of central New York’s leaders in the print and copy business.
   Hudson can be contacted via email: mhudson@dairybusiness.com or phone: 315-703-7979 ext. 228.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   The falling block cheese roller coaster reversed gears this morning and inched up 0.5¢, to $2.0425/lb., after losing 3.25¢ yesterday. This is the first positive move since April 17. Six carloads found new homes; the first 5 at $2.0325/lb., with the final sale taking it to today’s higher close. One bid at $2.0350/lb. went unfilled. Cheddar barrel was unchanged, holding at $2.0375/lb., after slipping 1.75¢ yesterday. There was no barrel activity today.
   The Class III futures must have liked the block reversal as all months moved higher today. June was up 40¢, July up 31¢, & Aug. up 27¢.
   Butter was also unchanged this morning, following five consecutive sessions of gain, and held at an unseasonal $2.15/lb., with no activity.
   Cash Grade A nonfat dry milk inched up 0.25¢ on a sale, to $1.78/lb., and a bid at $1.78/lb. was unfilled.

Today’s Market Closing Prices
Butter: Unchanged, at $2.15/lb.
Cheddar blocks:  Up 0.5¢, to $2.0425/lb.
Cheddar barrels: Unchanged, at $2.0375/lb.
Grade A nonfat dry milk: Up 0.25¢, to $1.78/lb.
Class III milk: May $22.89, +19¢; Jun. $21.49, +40¢; Jly $20.48, +31¢; Aug. $20.00, +27¢; & Sept. $19.82, +12¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.10, +23¢ from Tuesday. The 2nd half average is now at $19.57, +15¢ from Tuesday.
Looking ahead:
   The California Department of Food and Agriculture announces its June Class I milk prices on Friday. Federal order prices are announced by USDA on May 21. USDA issues its monthly World Agricultural Supply & Demand Estimates report Friday, which will include the Agriculture Department’s latest estimates on milk production and milk prices, and the monthly Crop Production report is issued on Friday.

Thursday on DairyLine:
   National Milk's Chris Galen talks about dairy imitators
   Greg Larsen, from GEA Farm Technologies, debuts a new monthly segment called  
      the "Robotic Milking Minute"

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